The world’s largest sports website, ESPN.com, is walking away from advertising networks, opting instead to sell ads directly. After recently leaving Specific Media, the site has turned down offers from other ad networks according to Mediaweek. This is the latest, and perhaps most significant story in a series of anti-ad network sentiment that has been traversing the Internet lately.
The key issue here is that ESPN.com feels it can sell the ad inventory on its site without having to give a commission back to the ad networks. Being a massive site with a highly coveted demographic, they are likely right. The question is, if ESPN.com is successful in going it alone, will other sites follow suit?
Ad networks function by utilizing a large network of advertisers to sell ad space on sites. This allows the site to focus on creating content while the ad network manages much of the business. However, with larger sites now able to hire their own sales teams, ad networks roles in those sites are decreasing.
While reporting that ad network Federated Media (which VentureBeat utilizes) was nearing a $30 million round of funding last week, we asked how it could maintain its base of publishers while taking a 40 percent revenue cut. Upon seeing this ESPN.com news, some of the larger publishers may be asking themselves the same thing.
This discussion is not entirely dissimilar from the one currently going on in the music industry. Quite a few notable artists including Radiohead and Nine Inch Nails have experimented with selling their music directly to fans, bypassing the labels. Such a move allows the bands to make a higher return off of sales — the same outcome ESPN.com is likely to see by walking away from ad networks.
Current online ad networks are also under attack from larger entrants in the arena. Yesterday, Forbes unveiled plans to launch its own ad network for up to 400 financial blogs. Google, also recently started testing out a new service called Ad Manager, a new advertising service that will allow users to take care of their own ad sales and fill in the rest with AdSense ads (our coverage).
Federated Media’s founder John Battelle is very aware of the problems current ad networks are facing. By focusing too much on building impressive platforms rather than addressing the core need of advertising that engages, “ad networks have become the problem,” Battelle notes. He lays out more thoughts in a Q&A with CNET.
Tags: co:espn, co:federated-media7 Comments
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Yakov said:
That’s indeed very good news! It is yet another proof that there is a strong market opportunity for Quintura that easily creates a site search cloud and then helps publisher like ESPN to monetize the site search/navigation much more efficient by selling brand graphical ads in the search cloud.
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Adam said:
The key is that ESPN is actually not alone. They leverage a larger sales/ads department of Disney.
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MG Siegler said:
@adam - great point, not only is ESPN a behemoth in itself, but when it has one of the largest media companies as a parent, there is not much risk for them. That is the key, the move so far only seems like it will really make sense for huge players such as in this case.
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Jay Parkhill said:
If ESPN can do this, why would it need to stop with its own properties? As long as the commission rates are high enough, what’s to stop it from being the biggest vertical ad network among all sports sites?
And if they can do it, could the New York Times do it too? When online ad revenue is so low compared to print revenue, and with few other viable revenue models in sight, would they be foolish not to try?
I’ve never worked in journalism so I’m just guessing at some ideas. I’d love to hear thoughts from experts in the field (hint hint).
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MG Siegler said:
@Jay - I wouldn’t be surprised at all to see sites of ESPN’s size and potentially a bit smaller do this. I agree with your line of thinking that’d it might be foolish not too if they can keep that much more of their revenue. Of course, just as with big music acts leaving labels, it likely wouldn’t work too well with smaller sites.
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John G said:
I think the Quinturas and Quigos of the world have the right model as white label service providers to these guys.. sit in between google and adnets and just help publishers better monetize.. this is the space i would look at to innovate in as a startup
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Christine Schoultz said:
As Vice President of Marketing at Specific Media, I felt compelled to submit a brief clarification regarding the reference to the ESPN Specific Media relationship. Specific Media has not had a business relationship with ESPN since 2005. The statements the Mediaweek writer made regarding ESPN recently dropping Specific Media are simply not true. Our two organizations have not even spoken about doing business together at all in the past few years. It is unfortunate that this Mediaweek article was reprinted considering the inaccuracy of this information.
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